Thursday, November 26, 2015

Fixed Deposit Home Rate - The Alternative Interest Rate To SIBOR

Interest rates are going up. This has been the concern for the past few months for many people. A rise in interest rates hurts borrowers and benefits savers. If you are a borrower, a rise in interest rates will really affect you. If you have existing loans such as car loans, housing loans and student loans, a rise in interest rates will mean you'll have to pay more every month to repay these loans. 

If you have existing loans especially housing loans, here is some good news for you. There are ways to mitigate this rise in interest rate and reduce the impact it has on you to the lowest. In this post, I'll show you what the industry calls Fixed Deposit Home Rate. This is an alternative rate to SIBOR which I believe is much better for home loans. If you're on a SIBOR or other variable home loan packages, read on to find out more about this new rate which will be beneficial for you to refinance to.

How Do We Know If Interest Rates Are Rising In Singapore?

The most widely used rate for interest rates here in Singapore is the SIBOR. It is called the Singapore Interbank Offer Rate, a rate which Singapore banks lend to each other. There is the 1 month SIBOR, 3 month SIBOR and the 12 month SIBOR. These rates are commonly used for housing loans when you loan from the bank on a variable rate package. 

Currently, the 3 month SIBOR is about 1.1%. The highest 3 month SIBOR was 7.75% in January 1998 and the lowest was 0.25% in September 2011. From the chart below, SIBOR can really swing quite widely. It is really possible for SIBOR to increase back to the 2-3% mark.  



When SIBOR increases by too much, those with housing loans will have to pay more for their instalments. For the past few months, I've been working closely with banks for my mortgage consultancy work. I've seen rates increase and also helped people refinance their home loans to better rates. There is an alternative rate to SIBOR which I think is a better choice for those with existing home loans. If you have existing home loans, listen to this carefully as it will definitely help you save more money in the long run.

Fixed Deposit Home Rate - The Alternative Interest Rate To SIBOR

In the past, there are only limited choices for home loans. People either choose the fixed rate packages or the floating rate packages pegged to SIBOR or the bank's board rate. For SIBOR, the rate is too volatile while the bank's board rate is not as transparent meaning the rate can change as and when the bank decides to change.

To safeguard ourselves against interest rates increase, we can choose the fixed rate packages but fixed rate packages are only available for 2 years to a maximum of 3 years currently. Thereafter, the rate will revert back to the variable package pegged to either SIBOR or bank's board rate again.

Now comes a new package called the fixed deposit home rate. This rate is pegged to a bank's fixed deposit rate where it is certainly less volatile than the SIBOR. Why the fixed deposit rate does not increase that much is because increasing this rate is a cost to the bank. Especially in Singapore where a lot of cash is parked in the fixed deposit accounts, banks have to think twice before increasing this rate.

From the past historical trend, the highest fixed deposit rate was around 0.875%-0.925% as compared to the highest rate of SIBOR at 7.75%. The fixed deposit rate can be either pegged to the 12 month, 18 month, 24 month or 36 month rate. Currently, only 2 banks in Singapore offer this home loan package which is pegged to the fixed deposit rate.

Refinancing to this rate would mean more stability for our monthly housing loan instalment and cost savings in the long run. To find out more about this rate or refinance your housing loans to this rate, you can email me at sgyi@homeloanwhiz.com.sg. I do not charge any fees for providing advice or refinancing your loans. This is a strictly complimentary service I offer to readers here.

Alternatively, fill in the contact form below for a free consultation and I'll get back to you shortly:

foxyform

Monday, November 16, 2015

Term Insurance Or Whole Life Insurance? Which Is A Better Choice?

My Encounters with Insurance

For the longest period of time, whole life insurance and insurance savings plan (endowment plans) were the only thing I know which existed in the market. 9 years ago when I was at the age of 18, I had my first encounter with insurance. I was still a student back then and was approached by a financial consultant on the streets while I was going out. I'm sure many of you have been approached before too. I agreed to hear more about insurance and sat at a MacDonalds with this consultant for the next 1 hour plus listening to what insurance is all about. I was introduced a savings plan and was told the interest will certainly be more than a bank's interest. Besides that, this plan also has death, total permanent disability (TPD) and critical illness coverage. It kinda makes sense that I can put in money, get higher returns for my money and still get the coverage. It sounds so attractive that I signed up on the spot. To this day, I still have the policy which I've been paying for the past 9 years.

The policy which I had, although has a coverage for death, total permanent disability and critical illness, was only $10,000. It is certainly not enough should I have dependants or if I need to provide for my parents in the future. My next few encounters with financial consultants was on the topic of whole life insurance. This time round, I took my time to decide whether to take up an insurance policy as the premiums weren't cheap. Many times, I was recommended policies with $100,000-$200,000 coverage at premiums of $200 per month or $2400 a year. I only just started working back then and didn't have a high starting salary. Paying $2400 a year is still quite a big sum of money to me.

Fast forward to today, I didn't purchase the whole life insurance for only $100,000-$200,000 coverage for $2400 per year. Later on, I found out another insurance called term insurance which I could get One Million coverage for only about $1500 a year. The same $200,000 coverage would only cost $300 a year back then instead of the $2400 which I was recommended. Why is there such a big difference in the premiums?

*Disclaimer: Before I continue, this post is not a recommendation for any insurance policies as I'm not here to do that. I will only list down the facts of what term insurance or life insurance is and let you see for yourself which is a better choice. Let's start!

Term Insurance Or Whole Life Insurance?

During NTUC Income's 40th anniversary dinner, Senior Minister Goh Chok Tong supported the use of term insurances and even asked insurers to put more emphasis on it. Let's see the rationale behind term insurance and whole life insurance and find out which is a better choice?

Whole Life insurance premiums are definitely much more expensive than that of a term insurance for a similar coverage. A person at the age of 20 can get a $200,000 death and TPD coverage for just $300 a year with a term insurance as compared to $2000+ a year for a whole life insurance. For whole life insurance, you get something back when you terminate your policy but for a term insurance, you would get nothing back at all. This is the argument put forth which discourages term insurance.

However, let's understand why we would get something back for a whole life insurance and not for a term insurance? For a whole life insurance, every dollar you pay as premium for the whole life plan, a portion will go into paying the mortality charge that provides you the cover you need. The rest of it is invested into the insurance company’s life fund. The mortality charge portion is never returned back to you. The only reason why you get money back from a whole life plan is because you gave the insurance companies extra money to invest. When you buy a term plan, you are effectively paying only for the mortality charge; you are just buying pure protection.

Have you heard of the phrase buy term and invest the rest? This is saying we should buy term insurance and invest the rest of our money on our own. Instead of putting our money into the insurance company's life fund, we can invest our own money and manage our own fund. This is of course subjected to individual preference. Some may not know how to invest their money and would still be better off putting their money in the insurance life fund.

But, there is a problem with whole life plans. If let's say we want to get 1 Million insurance coverage, it becomes too expensive if we were to get a whole life insurance. A check on DIYInsurance's comparison portal shows that a $100,000 coverage for whole life insurance would cost between $1600-$1900 a year. How much would a One Million coverage cost for life insurance? It could easily be above $10K a year.

DIYInsurance has also launched a term insurance table to compare the premiums across insurance companies in Singapore. The following is a table adapted from DIYInsurance's website for your reference. This Term Insurance table is also updated monthly by them.

We consider the following example of a Male, Non-Smoker:

  • Policy coverage till 65 years old (Eg. when children are independent)
  • S$1million Death and Total Permanent Disability (TPD) Coverage

Annual premiums of insurers in Singapore (S$):

AgeAvivaAXA LifeEtiqaGreat EasternHSBC InsuranceManulifeNTUC IncomePrudentialZurich LifeApply for Cheapest
30108710881990156013391202181016581304Apply 
40183518713440269026402016268125672001Apply 
50337933795330426044943701470242683549Apply 

For a Female, Non-Smoker,

Annual premiums of insurers in Singapore (S$):

AgeAvivaAXA LifeEtiqaGreat EasternHSBC InsuranceManulifeNTUC IncomePrudentialZurich LifeApply for Cheapest
3086879113901070100894813501249967Apply 
40139013572370175019801410210718811506Apply 
50245020783450260031442276385030492661Apply 
*With information from www.diyinsurance.com.sg and comparefirst. Figures are compiled on 5th November 2015.

** Prices reflected in the table reflect ongoing existing promotions and discounts which are in the knowledge of.

Term insurance or whole life insurance? You can make your decision base on the information provided above. There are many ways to compare insurance premiums now in this IT savvy world we live in. All of us can make better informed choices!

DIYInsurance by Providend Ltd

To compare and purchase insurance, DIYInsurance (Do It Your Way Insurance) is Singapore's First Life Insurance Comparison Web Portal by Providend Ltd. DIYInsurance aggregates products from various insurance companies and provides 30% commission rebates in addition to ongoing promotions.

Backed by key people with almost 2 decades of experience, all staff from DIYInsurance are salaried based and do not participate in sales-based compensation or incentives of any kind. Not being remunerated on a commission-basis means there is no hard-selling and over-selling. This is insurance based on no one's agenda except your own. Click here to request a Term Life Insurance quote through DIYInsurance.

*This post is written in collaboration with DIYInsurance. The opinions and expressions in this article are solely based on my own thoughts and experiences. 

Saturday, November 14, 2015

Does Money Make You Mean?

Money is the root of all evil? I came across a video on Facebook which shows an experiment that was conducted using the game of Monopoly to see whether does money really make people become mean? Its interesting to note how money can really change a person. Watch the video below:

Does Money Make You Mean?
What happens when a rigged game of Monopoly makes some players really rich? Watch the full talk here: http://t.ted.com/TKyFGXE(Created in collaboration with AJ+.)
Posted by TED on Wednesday, November 11, 2015



The experiment shows that having more money does make people become less sensitive to the plight of others. As a person gets wealthier, their feelings of compassion and empathy goes down and their feelings of entitlements goes up. The wealthier you are or the higher your status, the more likely you're to pursue personal success to the detriment of others. This is quite true as what we can see even in work places. Bosses compete and take advantage of employees just to climb the corporate ladder or meet their targets.

But, there can be changes to this by reminding people on the benefits of cooperation instead of competition, or the advantages to community. This can make wealthier individuals more empathetic in this world. Its a good reminder to us as we earn more money or climb the corporate ladder in our own lives. Its not about chasing money but creating value in the world. That's what I believe.

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Thursday, November 12, 2015

Do You Like Your Life? - Appreciate What You Have

Just a few days ago, I saw a comic series on 9gag which to me was surprisingly quite meaningful. 9gag is known for its just for laughs material and some don't really make sense. But this particular comic they shared is certainly not just for laughs. It's titled: "Appreciate what you have".

In life, a lot of people are unhappy. We're unhappy we have to work, we're unhappy we have not enough money, we're unhappy that we can't be better than others. Let me bring you back to the days when you were still a student and let's see what made people unhappy and unappreciative of what they have.

When you're just a student, you probably don't have much material possessions and at that time you hope you'll be able to grow up faster and start earning your own money so you can buy the stuff you like. You may envy others who come from richer families and when your friend shows you the things their parents bought for them, you also wanted it and go back home to try and ask your parents to buy for you.

After you graduate from school and start working, you were initially excited about working and earning your first pay check. However, as time goes by, you start to dread work and the money doesn't really motivate you anymore. You wake up unhappy going to work every single day not knowing that there are other people out there who want to work but don't have a job.

You go to work taking the public transport and one day you missed the bus and will be late for work soon. You get frustrated and thought how good if you had a small car which you can drive around.

Soon, you earn enough money to afford a small second hand car but the air con breaks down a lot of times and its not as comfortable as it seems. You look at the car beside you and thought how good if you can afford a new car.

After a few years, you bought your own new car and am happy with it. However, one day, you see another bigger car beside you and thought how good if you can own a bigger car which is more comfortable. Your car seems to be a little small and squeezy.

Indeed after another few years you manage to buy a bigger car. You feel comfortable and happy. However, one day, you see a very nice car just beside you. You thought cars are not just meant to be comfortable. Its meant to be nice too so it shows your status. Your car seems to be a little dull and boring.

And really, after a few years, you bought that nice, beautiful, comfortable car of your dreams. Then, when you think you won't want more than that again, you got stuck in the same traffic jam and thought how good it is if you can own a helicopter.

Helicopter? How is it possible that someone will be not satisfied to the extent he wants a helicopter for transport. Well, it has happened all over the world before. There are people who own their own helicopters and private jets to travel.

And now, here's the comic from 9GAG. Do you appreciate what you have in life? Being grateful can certainly make our lives happier. Remember while we are enjoying the small pleasures of life, there are other people who are less fortunate than us.

Photo Credit: 9GAG

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Monday, November 9, 2015

Passion or Discipline? What Makes A Person Successful?

What makes a person successful? Some say its passion, some say its discipline. What do you think?

Passion to me is when we love something we do, its a feeling we have that keeps us going. Passion however, can get us out of hand sometimes. Feelings makes us emotional and can't think rationally. We may end up doing crazy things because of passion and end up causing our health to suffer. When we like something so much, we sometimes can be obsessed with it to a point when we are willing to give up everything for a cause.


Discipline on the other hand is building up habits in our lives. We brush our teeth everyday not because we feel passionate about it but because we build up discipline or habits for it. We know what's important in our lives and take care of our health by eating healthier, sleeping well etc. We build up habits to save money not because we are passionate for it but because we know it is important for our future.

Now, which is more important? Passion or discipline? In life, I think we need some passion and also some discipline. Let me explain why. Imagine if you're passionate for something and you don't eat or sleep just to do that thing you're passionate for. Is this even sustainable in the long run? You may end up lying on the hospital bed even before you could be successful. On the other hand, if you just have discipline only and not passion, then your life is just a routine without any feelings.

Having both passion and discipline is not easy. We may have found our passion but do not have the discipline to make sure we balance our lives by sleeping enough, eating well etc. We may have discipline but will find it boring if we do not have passion in what we do. Blogging has been a passion to me. But I make sure I do not get so obsessed with it that its the only thing in my life. I still work because blogging doesn't give me an income to sustain my lifestyle. I still have my own social life and take care of my health. It actually takes both passion and discipline to write on my blog.

Discipline can be trained. It takes effort to build up good habits. Habits of saving money, habits of eating healthily and habits of sleeping well can be trained. This is the first step to sustain us for life. However, passion cannot be trained. We cannot force ourselves to like something. When I was young, I had the opportunities to explore the artistic side of me such as arts and music but I did not have the passion for it. I've seen people who are so passionate for arts that they spend hours upon hours drawing or practising their skills. This is just not me.


Passion has to be searched. It comes from the heart. When we find it, we will know it in our hearts. Its that simple, just search your heart and take time to listen and think about your life. Without passion, our life feels meaningless. With passion, we still need discipline to make sure it is sustainable. Find your passion, train your discipline. Life will be more meaningful and sustainable as a whole. Success is not measured by how much you have but by how much you have lived your life as a person.

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Related Posts:
1. How Delayed Gratification Can Determine Success or Failure?
2. Finding Your Passion and Keeping It Alive

Friday, November 6, 2015

Benefits of Crowd Lending VS Stock Trading

Crowd lending or crowd funding is something very new in Singapore. In the past few months, there are more and more reports on the mainstream media on crowd lending in Singapore which resulted in more people investing their money through these crowd lending platforms. I have written on crowd lending and also on stock trading before. I mentioned before that many young people started out trading in the stock market partly because of the lure of quick money. Both crowd lending and stock trading has its risks and I'll explore the differences between these two. Let's see which is a better choice for most people to start with.


Is it that easy to make money through stock trading? 

Trading is a psychology game. Buying and selling stocks in the short term while betting on price movement requires a lot of hard work too. We've heard traders who earn tens of thousands in a very short time and we see these advertisements very frequently on those trading workshops. Some of these workshops even have software to help you trade and make money automatically. It was said this eliminates the psychology aspect and doesn't require much effort on our part. Is it really that easy to make money?

I heard a real life story of a lady who was retrenched during the 2007/08 financial crisis. She was a futures broker in a financial institution for 17 years. She worked mostly from 6pm in the evening to 5am in the morning trading futures market.

After being retrenched, she thought she would be able to trade at home and have time to look after her son. But, within 10 months into trading at home, she lost quite a lot of money and stopped. Why did she lose money? She said trading in a financial institution allowed her to have tips and instant news to make decisions fast. Trading at home is different as most of the time the news is delayed. The second reason is trading an institution money's is different from trading your own money. The emotional and psychological aspect is completely different. Even with the experience and knowledge of trading, it is still highly possible to lose money.

After hearing this story, it made me realise trading is not easy. Firstly, I've heard that most people lose money in trading and it is said that only 5% of the traders in the world can make money consistently. Secondly, I've heard that trading is a psychological and emotional game. If you can't control your emotions, you can't be successful in trading. This point is also confirmed.

So is it still possible to make money through trading? I think it is still possible to make money from trading but it will not be a lot of money. In actual fact, very few people are full time traders. Most trade on the sideline occasionally. You may not agree with me but I've traded before and know what it is like to lose money. It is really an emotional game. Want to make a lot of money through trading? Think again.


What about investing through Crowd lending platforms? 

Investing through crowd lending platforms can yield you more than 10% a year. That is a pretty decent return on investment. Wait... some of you may be thinking this sound too good to be true? How can there be such thing as a more than 10% yield on investment? Let's pause for awhile and take a look at how crowd lending works to understand it better.

Crowd-funding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. One of the crowd-funding platform for businesses in Singapore is Moolahsense. MoolahSense, as quoted on their website, is “a trusted P2B lending platform that empowers investors to stimulate economic growth by providing finance directly to growth SMEs, in exchange for an attractive rate of interest.”

MoolahSense co-founded by the CEO Mr Lawrence Yong, who has been a practitioner in the financial sector for the past 12 years, with experiences spanning private wealth management and investment banking. MoolahSense has opened up a whole new avenue for us ordinary investors who want a part to play in investing in SMEs in Singapore.

The investment opportunity provided by MoolahSense is essentially a bond-like program where one can lend money to the SMEs and get interest in return on a certain time period – either on a monthly or one-time basis. Only 1 in 20 SMEs get funding from banks even though they contribute greatly in the economy of Singapore. Crowdfunding is a win-win situation for both SMEs and investors. SMEs get the funding they want and investors get the interest in return.

In simple layman terms, when we crowd fund a company, we are lending money to that company in exchange of some interest. We become lenders just like when the bank lends money to individuals, they charge an interest in exchange for the loan.


Crowd Lending VS Stock Trading

Limited Losses

Every investment has its own risks. Stock trading can make you a lot of money but can also make you lose a lot of money. I've heard of people who lost hundreds of thousands of dollars through stock trading. Stock trading like Forex, options or futures is highly risky as we can lose more than the amount we have.

For crowd lending, your losses are limited to the amount you invest in. For example if you invest $1000 and the company defaults on its payment, you will only lose a maximum of $1000. Moolahsense, a crowd lending platform, limits the risks for investors by meeting up with the management of the company, engaging them in investors sessions and in the case of default, they have directors of the individual companies as guarantors and also debt collectors agencies to recover the money.

Timing the market and volatility

As mentioned earlier, trading is a psychology game. Why so few traders are profitable in the long run is because the market is always changing. The market is volatile and is definitely not for the weak hearted. Nevertheless, there are still some successful traders who manage to make money from trading the markets.

For crowd lending, we are essentially just lending to a corporation. The returns are in the form of interest payable to us as we lend to these corporations. In crowd lending particularly, we are lending to SMEs. The returns are predictable so there is no need to time the market or be subjected to the volatility like the stock market.

Fees for buying/selling

For stock trading, there are always fees for each buying and selling transaction. If we only trade with a small sum of money, it wouldn't make sense at all as the fees would have eaten up most of our profits. For crowd lending with Moolahsense, there are no fees charged at all. This is certainly beneficial to investors who just want to invest a small amount of money. You can invest  from as little as $1000 in each company.


Crowd lending vs stock trading, which do you think suits you more? There are many different investment products and different ways to grow our money. Diversifying and knowing the risk in investment will help us go a long way.

Check out Moolahsense website to find out more about the opportunities for SMEs funding and investments.


Monday, November 2, 2015

The New Young Working Adult and Baby Insurance Package

How many of you would think that buying insurance is a hassle? With so many insurance products to choose from, how do we know which is more suitable for us? Did you know that most people actually end up overpaying for insurance and under cover themselves?

Most of us young people when we just enter the workforce, we will be clueless on which insurance to buy to protect ourselves. A lot of us later realised that we bought the wrong insurance and could not change it any more because there would be penalties imposed.

How about when you have a new born baby? We know that insurance is important for our child's future but do we really know which one to buy for them? Even if we do know a bit, most of us would not have the time to look through every package that's available in the market and choose the best insurance policy out there. Is there an easier way to this?

Yes there is an easier way. In this era of information technology, everything is going online. This includes insurance. We can go online to shop and compare the best prices for our clothes and even services, we can go online to compare housing prices, car prices, air ticket prices and tour packages. Did you know we can also go online to compare insurance products and their prices?

When I was just entering the workforce, I somehow knew that insurance was important but didn't know which insurance is more suitable for me. When I was approached by a financial advisor from a particular company, I always didn't buy any insurance products even after hearing them talk for the past few hours. In my mind, I always think there would be better and more value for money insurance policies from other insurance companies. I wanted to compare the prices and see which is better.

Comparing Insurance Online

Thankfully, the Monetary Authority of Singapore (MAS) launched its own insurance comparison portal called compareFIRST which allows us to compare the different insurance products of different companies. It is similar to DIYInsurance web portal which also offers comparison features. DIYInsurance is the 1st Life Insurance comparison web portal in Singapore.

Previously, I wrote a post on Do You Really Need A Financial Advisor?. This post attracted quite a lot of views where I wrote about my experiences with financial advisers. Some were good while some not so good. It is really hard to know which advisers are good thus insurance comparison portals does help in this.


The Young Working Adult and Baby Package

DIYInsurance is not only a comparison web portal but they are genuine in providing the best service to the consumers. They recently launched 2 new insurance packages namely the Young Working Adult and Baby Package.

Now listen carefully, here's what they did which makes these packages so unique. Firstly, they understand the needs of what we need as a young working adult or when we have a newborn child. They put together a combination of policies, compared against different insurance companies, to bring us the best price we can get. Now, we don't have to think hard on what insurance policies or even compare which policy from which company is better. All these has been done for us. Its easy, just pick one package and go. We can buy different insurance policies from different companies all through them without having to approach individual advisor of different companies.

I went to their website, took a good look at the packages and can't help but feel that they really put in a lot of work in putting together the packages. Let's start with the Baby Package.


DIYInsurance Baby Package

They have 2 different packages in the baby package category. One is the Child protection plan and the other is the education savings plan.


The child protection plan includes a life insurance cover of $175,000, a critical illness cover of $30,000 and also a hospitalisation plan. 3 different coverage all for an annual premium of only slightly above $1K.

Here's the screenshot of the child protection plan I took from their website:

(Click on photo to enlarge)

For the education plan, it is a customizable plan to give your child cash payouts at different stages of their lives in the future. Total payouts are as high as $56,921 when your child is age 18-22. This is quite a good sum of money for your child's education in the future. They are also giving commission rebates and $50 worth of shopping vouchers when you purchase a baby package from them.

You can refer to this link, Baby package, for more information.


DIYInsurance Young Working Adult Package

In the Young Working Adult package category, they put together a comprehensive package which covers 5 different areas of our lives. I was actually quite amazed when I see the coverage vs the premiums payable. I've researched on insurance products and prices for quite awhile now and this package that they put together is definitely at its best value.


(Click to enlarge)


The package includes:

  • Death/TPD coverage of $1 Million
  • Critical Illness coverage of $150,000
  • Early critical illness of $50,000
  • Hospitalisation coverage at private hospitals
  • Occupational disability income of $3000 monthly with 3% increase 
All these for a premium of only $220 per month if you're 25 years old currently. What's more, you'll receive $350 from them upon taking up this package as a form of commission rebate which DIYInsurance has been giving to its clients for the longest time now.

You can refer to this link, Young Working Adult Package, for more information.


DIYInsurance Price Beater

Have you heard of price beat guarantee from other companies before? DIYInsurance launched its very own price beater to offer you a lower price than what you were offered out there. Now, we don't have to worry about over paying for insurance. DIYInsurance will help you review the insurance policy quotes you receive from other insurance companies and offer you a better one.



You just have to email them the quote and benefit illustration you were offered, then they will verify the comparison and offer you a quote within 3 working days and give you up to $50 in shopping vouchers and 30% commission rebates. Refer to this link for more details: http://www.diyinsurance.com.sg/portal/home/price-beater

This is definitely beneficial to consumers like us. We get the best price for our insurance needs. 

Check out their website and get the best value for your insurance policies today! 

DIYInsurance Website: http://www.diyinsurance.com.sg

This is a sponsored post by DIYInsurance.

Sunday, November 1, 2015

Saizen REIT entire portfolio is bought by Lone Star for an offer price of S$1.172

Just after less than 1 week of posting on the possibility of Saizen Reit being acquired by another firm on my blog, the news is confirmed!! Existing shareholders of Saizen Reit would be happy hearing this news. Saizen Reit has been a good investment for me for the past 2 years. It is sad to bid goodbye to this stable income producing investment. 

This is the confirmed news:

"Japan Residential Assets Manager Limited, in its capacity as manager of Saizen Real Estate
Investment Trust (“Saizen REIT”, and as manager of Saizen REIT, the “Manager”) wishes to
announce that HSBC Institutional Trust Services (Singapore) Limited, in its capacity as trustee of
Saizen REIT, has on 31 October 2015 accepted an offer (the “Offer”) for the acquisition of all the real estate assets (the “Properties”) in Saizen REIT’s portfolio in Japan by Triangle TMK for an agreed purchase consideration of JPY44,660.0 million (S$517.3 million) Triangle TMK is a Japanese affiliate of Lone Star Real Estate Fund IV and Lone Star Funds.

The Purchase Consideration is at a 3.4% premium to the appraised value of the Properties.

The Purchase Consideration is estimated to translate into an implied net offer price of S$1.172 per unit of Saizen REIT (“Unit”), or a slight premium to Saizen REIT’s adjusted net asset value (“NAV”) per Unit based on audited figures as at 30 June 2015, after taking into account estimated transaction-related costs and expenses
.
The estimated implied net offer price of S$1.17 per Unit represents a 36.9% premium above the
closing price of S$0.855 per Unit on 22 October 2015, being the day immediately prior to the
Manager’s announcement of the Offer on 23 October 2015, and a 40.9% premium above the 1-month
volume-weighted average price per Unit as of 22 October 2015."


The offer price to me is quite reasonable at $1.172 as its a premium to its NAV. I think this exceeds the expectation of many existing shareholders. Its a 30% rise above the closing price of 92 cents last week before trading halted. 

Looking back, I've written a series of articles on Saizen Reit which affirmed my decision to invest in the Japanese real estate market. Saizen Reit is the largest investment I have in my portfolio. With this gone, I'll have more cash to deploy to the next best investment in search for better dividend income. 

Congratulations to all existing shareholders of Saizen Reit!

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